Sprint Nextel Corporation stock jumps 13% in a single day. Some of you might remember from my last brokerage account update that I own a leveraged position that is long on Sprint Nextel Corporation (Symbol: S). This position represents about 21% of my brokerage account’s total value.
I own 10 options to call @ $1.00 by Jan 19th, 2013. This is an “in the money” option, so everything that this stock goes up is a leveraged gain. The result is I am now up 8.3% on this transaction, but I remain long and have decided not to sell. I believe this stock has much more room to grow.
I’ve said it before and I’ll say it again, all Sprint Nextel has to do is slightly turn things around and generate a tiny EPS to make this stock an absolute deal. The current market valuation is $7.55B, which I would argue is insane.
I understand the market doubts Sprint Nextel Corporation’s ability to generate net income, but their ratios are very favorable when comparing to other carriers. AT&T’s market cap is rough 22.5x’s sprints, but their revenue is only 3.22 times as big.
The end all message here is that the market does not believe Sprint Nextel Corporation can generate net income, and in fact the only way the market cap for this stock would make any sense is if there was a high probability that Sprint Nextel Corporation will go away entirely, which I find possible but not likely. If Sprint Next Corporation turns a profit in the foreseeable future, this stock is going to go gangbusters.